Arcane Research: Market Moves into Extreme Fear

On the eve of the deepening correction, the cryptocurrency fear-and-greed index fell to its lowest level since April 2020. Arcane Research analysts presented several factors contributing to the index’s weakness.

Contango on Chicago Mercantile Exchange (CME) bitcoin futures effectively neutralised, though at the start of February the premium exceeded 20%.

Analysts noted that the current reading was below levels seen during the March 12-13, 2020 sell-off. On those days the premium on CME was higher than on unregulated venues. The situation now appears the opposite.

“The futures market reflected the rising bearish sentiment among institutional investors,” analysts explained.

Active sales of Grayscale Bitcoin Trust (GBTC) shares pushed their discount to net asset value (NAV) to a new all-time low of 25%.

Analysts stressed that such a situation threatens holders of the instrument who neglected risk-management rules when trading with leverage. Forced liquidations of their positions could pose a risk to Bitcoin, they added.

Analysts from Glassnode explained that the current correction is the result of panicked selling by short-term investors.

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